October 17, 2011 | Nicholas Zeman

(Updated 10/26) Perceiving a need and market demand for healthier soils among farmers and gardeners, an interdisciplinary team of forestry, finance and engineering experts at Yale University formed a company to produce biochar, or customized charcoal derived from organic plant matter, for use as a soil amendment.

The company, Encendia Biochar, is currently developing a pilot production facility and is also rolling out a “prototype” biochar-based soil amendment that targets urban gardeners as well as home gardeners as customers. “We have product on-hand, inventory that’s been mixed and blended, and we’re bagging it now,” says Encendia’s CEO Michael Sesko.

Background on biochar

Biochar has actually been around for thousands of years. Pre-Columbian Amazonian natives first created it by burning their agricultural waste in pits that they covered with soil. It is believed that they intentionally used the resulting biochar to increase soil productivity in constrained or infertile soil.

In studies, biochar has been shown to both prevent the leaching of nutrients essential to plant growth and to increase soil water retention, in turn greatly reducing the need for chemical fertilizers.

Biochar can also sequester carbon from agricultural waste, woody biomass, dying trees, or any other organic matter that naturally releases carbon into the atmosphere as it decomposes. Studies have shown that approximately 50% of the carbon that would otherwise be generated by natural organic matter decomposition can be sequestered in a highly stable form in biochar.

Today, biochar is typically produced and synthesized by using industrial grade pyrolysis systems. Think of these systems as industrial strength kilns that heat agricultural waste, woody biomass, and other organic matter to elevated temperatures in the absence of oxygen in order to produce biochar.

A market opportunity in organic waste

Encendia sees the millions of tons of organic waste being produced annually in the United States as an opportunity. And while most biochar companies primarily focus on remediation of land (stimulated ground cover around old mining lands, etc), Encendia focuses on the biochar’s application as a soil amendment.

Sesko told Seedstock.com that transforming organic waste materials into a biochar soil amendment offers great benefits for farmers including conservation of nutrients and water efficiency. “It functions as a sponge that absorbs nutrients and water in the soil and then releases those materials in a very efficient way,” he said.

Encendia is also customizing its products for different market sectors and conditions, and has been using an “all soils are not equal” sales approach, that recognizes diversity in the marketplace. “We’ve been developing seasonal products for fall, spring and summer that function differently throughout the year,” Sesko said. “Besides applications for farms, we also see strong growth among urban gardeners and developments in the turf market as our business evolves.”

Encendia’s business strategy

Sesko once served as an organic food sector analyst for JP Morgan, where he furthered his understanding of “how to build and finance innovative environmental projects” he told Seedstock.com. The company plans to complement its work on biochar customization with a decentralized biochar development model that builds production capacity in locations that intersect feedstock availability and biochar end users.

Contracting the delivery of organic waste feedstocks for production and negotiating contracts to sell the finished biochar in advance shows investors that Encendia’s projects can make money, Sesko said. The University of Washington, Seattle, reports that biochar currently sells for about $1,500-per-ton.

Carbon credit potential 

Another aspect of the evolving nature of the biochar market is the future of global carbon trading. One of Encendia’s advisory board members, Neil Cohn, was a ‘cap-and-trade’ advisor to the Obama Presidential Transition Team and was the founder of Natsource, a $1.5 billion carbon trading fund. The European cap-and-trade system, the world’s largest, was valued at $119.8 billion last year, according to World Bank estimates.

The central feature of UN’s Kyoto Protocol—the international pact to battle climate change—was its commitments to reduce emissions, binding by international law. “The adoption, or imposition, of caps creates a commodity — emission units — which can be traded/sold,” the UN said. “The ability to trade emission units gives countries or companies some flexibility in meeting their emission reduction requirements, thus reducing economic costs, and provides a market-based financial incentive to reduce emissions.” Because biochar production is seen as a way to mitigate greenhouse gas emissions and fortify soil, London’s Financial Times called it a “wonder material.”

While the company’s business model does not depend on the economics of trading carbon as a commodity, future legislation that requires certain manufacturing sectors, like coal, oil and livestock, to buy allowances from carbon negative companies could create significant added value in the next few years. “We’re not looking to monetize the [carbon-credit generating potential] of biochar because there is a lack of political will in the United States, and carbon markets are weak around the world,” Sesko said.  “But the ability to sell carbon credits could be a benefit to farmers that use biochar.”